A venture capitalist, willing to invest $1,000,000, has three investments to choose from. The first investment, a social media company, has a 20% chance of returning $7,000,000 profit, a 30% chance of returning no profit, and a 50% chance of losing the million dollars. The second company, an advertising firm has a 10% chance of returning $3,000,000 profit, a 60% chance of returning a $2,000,000 profit, and a 30% chance of losing the million dollars. The third company, a chemical company has a 40% chance of returning $3,000,000 profit, a 50% chance of no profit, and a 10% chance of losing the million dollars.  Which investment has the highest expected return? Which is the safest investment and why? Which is the riskiest investment and why?

Glencoe Algebra 1, Student Edition, 9780079039897, 0079039898, 2018
18th Edition
ISBN:9780079039897
Author:Carter
Publisher:Carter
Chapter6: Systems Of Linear Equations And Inequalities
Section6.1: Graphing Systems Of Equations
Problem 59PFA
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A venture capitalist, willing to invest $1,000,000, has three investments to choose from.

The first investment, a social media company, has a 20% chance of returning $7,000,000 profit, a 30% chance of returning no profit, and a 50% chance of losing the million dollars.

The second company, an advertising firm has a 10% chance of returning $3,000,000 profit, a 60% chance of returning a $2,000,000 profit, and a 30% chance of losing the million dollars.

The third company, a chemical company has a 40% chance of returning $3,000,000 profit, a 50% chance of no profit, and a 10% chance of losing the million dollars.

  •  Which investment has the highest expected return?
  • Which is the safest investment and why?
  • Which is the riskiest investment and why?
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